Galliford Try Building Ltd (“GTB”) was engaged by Estura Ltd (“Estura”) to design and build certain works under an amended JCT D & B Contract (the “Contract”). The Contract included payment terms which complied with the Act, and which stipulated that unless the employer submitted a payment notice within five days of an interim payment application (“IPA”) becoming due, the contractor would be entitled to the full sum claimed in that IPA.

GTB submitted an IPA for £4.075 million (“IA 60”) in respect of which Estura failed to serve a payment notice in time. GTB accordingly received an adjudicator’s award for the full sum claimed in IA 60, which it then sought to enforce against Estura by way of summary judgment. Estura did not dispute that it failed to serve a payment notice in time, but requested a stay of enforcement of the adjudication decision on the grounds of “manifest injustice.” 

The bases of Estura’s claim for a stay were that: (1) IA 60 was grossly overvalued, (2) the sum claimed was negligibly less than the anticipated final account sum, and therefore upon receipt of payment GTB would have no incentive to submit its final account, and (3) Estura could not pay the grossly overvalued sum of IA 60 and if it did it would not be able to afford the adjudication or litigation that would be necessary to ensure a proper valuation of the final account.

Before the application for summary judgment was heard, and one week after the first adjudicator’s decision, Estura firstly sought to have IA 60 valued properly by way of a second adjudication. The second adjudicator held that it did not have jurisdiction to “open up the question of what the proper value of works was”. Justice Edwards-Stewart confirmed that this was the correct approach, and noted that otherwise it would “undermine the provisional validity of an unchallenged interim application.” 

On the question of a stay of enforcement His Honour firstly agreed with the submissions of Counsel for GTB that the Court robustly requires compliance with adjudicator’s decisions, whether they be “right or wrong”.  However, the Act was also not intended to cause injustice, and therefore a stay of adjudication enforcement may be appropriate where there is a risk of “manifest injustice.”

On the evidence put forward by Estura the Court accepted, with some hesitation, that Estura would be unable to pay the full sum of IA 60 and further that if GTB were paid this sum it would have little or no incentive to remain on site or submit a final account. Therefore, in these “very unusual circumstances”, the Court found that it was left with two alternatives:

1. Take a robust approach and refuse to grant a stay on the grounds that to do otherwise would be contrary to the policy of the court to enforce the decisions of adjudicators, which would drive Estura into insolvency unless it was able to reach a compromise with GTB; or
2. Stay enforcement of part of the amount of the judgment.

The Court found that there was no defence to GTB’s application for summary judgment, however, in this “rare” and “exceptional” circumstance, it ordered a partial stay allowing enforcement of IA 60, for the time being, up to £1.5 million only.

In calculating the sum of the partial stay the Court considered the following principles (1) the terms of the stay should not stifle further pursuit by Estura of its rights, (2) GTB should not be placed in a worse position than it would have been in if its entitlement had been correctly assessed under IA 60 in the first place, (3) Estura should be placed in no better position than it would have been in had the second adjudication resulted in the declarations it was seeking, and (4) any recovery by GTB should not remove the incentive to complete and submit its final statement.